A new study reveals that North Carolina state government’s total spending on debt service — since 2003 — has grown 165 percent. Sarah Curry of The John Locke Foundation gives us details:
Remember voting for a bond on the ballot? You know, those things city, county and the state government use to pay for things like prisons, schools, roads, and any number of things. Normally it generates good debate, do we need the item the bond will pay for or don’t we? There are debates, yard signs and even television commercials whether or not voters should support a bond, but that all changed in 2003.
The 2003 budget created a new form of debt called special indebtedness. There are three forms of special indebtedness created, and they are: certificates of participation, lease purchase revenue bonds, and limited obligation bonds. The creation of these appropriation-funded debt vehicles gave legislators a method to issue non-voter approved debt, and over time have become the sole method for North Carolina’s debt issuance. Their creation was prompted by the necessity for alternative financing methods to allow more flexibility and the ability to take advantage of changing financial and economic environments. In the budget document, it was confirmed the state would continue to issue debt through general obligation bonds, which has not happened, and there was no rule introduced for accountability or transparency.
The big difference between these new debt vehicles and general obligation bonds is their price. Because they are funded through the state budget and not through the general taxing power of the people, the interest rate is higher.Meaning more money in the state budget must be directed towards debt service. To add to this, they are passed through a vote in the General Assembly, not a vote of the people. So the debate that used to occur, does not happen with the everyday voter. This has caused law makers to quickly move debt measures through without proper public debate, yet the public are those that are paying the higher interest rate. […]
In the 2013 legislative session, the NCGA passed legislation that places a cap on the percentage of state debt that can be taken on without voter approval.
Locke’s Fergus Hodgson also uncovered a disturbing trend within the legislature in 2012 where general fund spending went down, while spending outside the budget’s general fund exploded. Curry found that trend continuing in 2013.
Knocking down spending in the budget’s general fund while jacking it up outside the general fund is a great way to look like you’re being frugal, conservative and responsible with the people’s money when you’re NOT. The media tends to only report what happens within the budget’s general fund.
We’re already getting buried by federal debt. It’s up to $17 trillion, and expected to climb to $25 trillion if Obama’s 2015 budget passes Congress. Politicians like to talk about spending at the state or federal level as though its coming out of someone else’s pocket. Both levels of government confiscate from the same wallets.
I can see an excuse for a struggle over fiscal policy at the federal level. There is split control in the federal government. But when the conservative party OWNS Raleigh, we need to see a much more serious effort to implement fiscal restraint and get state government’s house in order.